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Solid but flat pork exports projected for 2012

U.S. pork exports will have a challenge to exceed the tremendous gains made last year, but it is expected that they will hold their ground.

“We are encouraged by the first few months of the year,” Phillip Seng, president and chief executive officer of the U.S. Meat Export Federation (MEF), told Pork Network. While he anticipates the final trend line may be flat, “it would still be our second best year on record.”

MEF is conducting its annual meeting in New Orleans this week, and pork, beef and lamb producers, committees and staff are meeting to discuss short- and long-term trends and programs.

For the first quarter of this year, U.S. pork exports were up 8 percent in volume and 20 percent in value compared to the same period in 2011. For March, exports totaled 60 percent of U.S. hog slaughter and accounted for $60 per head of slaughter, reports Danita Rodibaugh, MEF chairman and a pork producer from Rensselaer, Ind. Both are all-time monthly records. “As a pork producer, I am excited to see our pork exports surpass the levels we achieved in 2011,” she notes. “These results are important to the bottom line of our operation and thousands like it across the nation.”

Combine muscle cuts and variety meats and the United States now exports about 28 percent of its annual pork production. “It is one of our nation’s greatest long-term success stories,” Rodibaugh points out.

“Overall, we have our challenges, but also opportunities,” Seng says. He looks for Mexico, Russia and Canada to offer the greatest potential for pork this year, while the Asian markets will likely soften compared to 2011.

The major driver of U.S. pork sales in 2011 was a surge in Asia’s demand. For various reasons China, Japan and South Korea all faced significant pork shortages. “Add it up the pork production from the major countries and they were down 2 million tons of production at a time of increased demand,” notes Joel Haggard, MEF’s senior vice president, Asia Pacific.

The ripple effect of disease issues in China and South Korea along with Japan’s earthquake in the spring of 2011, particularly stepped up demand for U.S. pork in the second half of the year. “This year, production normalcy will return to this area,” Haggard notes.

China is on track to have ample supplies of pork, unless production problems arise. “We have tempered our expectations for continued growth in China in 2012,” Haggard says. “However, longer run, we are looking at incredible opportunity as China faces sustainability challenges for production.”

South Korea has rebuilt its swine herd faster than expected after the 2010-2011 foot-and-mouth disease break forced the country to cull one-third of its herd. “So the hole created by FMD has been filled back up with domestic production and demand is flat,” Haggard points out. “So total pork exports will be down and U.S. pork exports are expected to return to 2010 levels.”

U.S. pork’s No. 1 export market—Japan—has softened a bit in recent weeks as some issues have surfaced involving custom documents, but the expectation is for that to be resolved. “The U.S. has a major advantage in supplying chilled product to this market, and it looks very optimistic for us,” Haggard says.

Regarding Russia, John Brook, MEF director for Europe, Russia and the Middle East, points to the benefit of new market conditions there. “Since the beginning of the year, Russia has lifted its country-specific quotas, which puts U.S. pork on a level playing field with the rest of the world,” he notes. When Russia becomes a member of the World Trade Organization (WTO), it will have to drop its in-quota duty to zero, which again will benefit U.S. product.

“The prospects are good for (U.S.) pork for this year and beyond ,” Brook says. “Russia is pursuing self-sufficiency (in pork), but it will be a challenge.” He cites the on-going African Swine Fever epidemic, which “is not under control.”

Brook notes that access to the European Union is improving. Of course economic and political uncertainty lingers and continues to weigh on the Euro and hence the EU’s ability to import. It also makes its products more appealing in the export market where it currently stands as the world’s No. 2 pork supplier. Adding more uncertainty for EU producers, however, is the Jan. 1, 2013 gestation-sow-stall ban and its ultimate impact on costs and production.

Looking to the United States’ southern neighbors, Chad Russell, MEF’s regional director for Mexico, Central America and the Dominican Republic, the prospect look good. Sales to Mexico are running 17 percent higher than in 2011. Mexico has faced a severe economic downturn since 2008, which has made pork—a more value-based meat than beef—more appealing to consumers. “We see this pattern continuing this year and into the future,” Russell notes. “Mexico is importing a lot more pork and poultry and much less beef.”

Adding to Mexico’s meat supply challenges is the country’s most severe drought in 50 years. Feed prices have soared and the country’s smaller meat producers are going out of business. “The Mexican consumer likes meat, and they have to fill the gap,” Russell adds.

Central America is a small, but interesting market, Russell points out. There is tremendous development underway and “it has a lot of untapped potential,” he says.

The U.S./Panama Free-trade Agreement is expected to begin this fall. “Pork tariff rates will go to zero upon implementation,” he says, which then increases the opportunity for more U.S. sales.

In the end, Seng forecasts U.S. pork exports on a volume and value basis to be very similar to 2011, which totalled 2.229 million metric tons and $6.1 million in value.